Living Longer: Health Care, Life Insurance and Retirement Costs for U.S. Citizens

At first glance, one would tend to assume that living longer is a blessing. One gets to spend more time enjoying the company of loved ones, see grandchildren grow up, etc.. However, it’s also worth wondering how current standards of longevity for U.S. citizens tie in with the hefty costs of medical care, the issue of purchasing life insurance, and the cost of retiring. Let’s take a look at how much we’re actually spending on health care compared to other countries, how longer lives impact our life insurance premiums, and whether or not we should all just find a different country to retire to.

Health Care Costs in the U.S.

Obamacare was definitely not the first time the issue of health care costs cropped up in the United States – far from it, in fact. For decades now, Americans have been complaining that getting access to medical services in their own country was far less affordable than going abroad for treatment, surgical interventions, and other types of medical care. Yet Obamacare did glean a ray of hope, in terms of more affordable medical expenses on the home front for many Americans. Though the reform has already come into force as of the date this article was written, it’s still interesting to note how unaffordable health care really is in the United States.

According to 2011 figures from the Organization for Economic Co-operation and Development, Americans spend $8,508 per capita per year on health care. 17.7 per cent of the country’s GDP goes toward funding this sector, and 47.8 per cent of it is funded from taxpayer money. There are 2.5 doctors and 11.1 nurses per 1,000 individuals in the States and the life expectancy is 78.7 years. That’s almost in spite of the rather staggering smoking and obesity rates, which stand at 14.8 per cent and 36.5 per cent, respectively. Comparatively, in Italy an individual will only spend $3,012 on health care each year – but the sector is publicly funded by 77.8 per cent, even though that only means 9.2 per cent of the GDP. Italians can expect to live up to 82.7 years, on average. The figures are similar for Spain, but, more surprisingly, also for Japan, which has one of the highest life expectancy rates in the world, also standing at 82.7 years. Belgium passes the $4,000 mark per capita per year spent on health care ($4,061), as do France ($4,118), Germany ($4,495), and Canada ($4,522). All these countries have a life expectancy below 82.7, yet, at over 80 years, rank higher than the U.S. in this respect.

How Does Longevity Affect Living Costs?

According to Market Watch, The Wall Street Journal’s online economy section, the correlation between cost of living and an increase in expenses is undeniable. People in the U.S. may not expect to live as long as those in Italy or Japan, but they do live far longer nowadays than they did in 1583, when the first ever life insurance policy was written. And starting from that fortuitous moment, humanity (and life insurance brokers in particular) have not ceased to ask, “how long do people actually live?” There is still no definite answer to that question, but the data coming in from various regulators in the insurance industry shows that people are living longer and, in turn, spending more money on their retirement, health care, and life insurance.

The figures are actually rather shocking to even try and comprehend. Life insurance annuities, which represent all the insurance products that pay out more the longer the policy holder lives, cost $1.6 trillion per year in the United States. Private and government-funded pensions are worth a further $6.5 trillion and a mere extra year in life expectancy would up the bill by another $115 billion, says one of the most reputed reinsurers on the market. Factoring in 401(k)s, other plans with defined contributions, IRAs, and currently active life insurance policies brings the final amount to around $27 trillion in money saved by Americans in order to provide for their golden years. The situation becomes even more interesting, when approached from an individual angle, related to inflation and the cost of living. A person currently in their fifties who would want to save for living to the ripe old age of 82 would have to enrich their current savings plan by some $160,000, i.e. $2,500 per year. What the WSJ calls “the death calculus” may sound like a joke (albeit a rather morbid one), but it’s also a very delicate, if not even severe matter of personal retirement planning and budgeting. In other words, Americans had better go online stat and start working out how much they need to be saving up, if they plan to live much longer. And who doesn’t, really?

Should Americans retire somewhere else?

Many of them actually believe that they should – and, for many, the destination of choice is the country of ‘pura vida’ i.e. “The Good Life” Costa Rica, often dubbed one of the happiest countries in the world by pollsters, boasts some 50,000 American expats, against a population count of 4.7 million. The demand has, of course, spawned an industry of its own, including online retirement information portals for Americans looking to do their research on Costa Rica. But what is it they seek (and apparently also find) there? Plenty, according to the internet and official data. The country has superb landscapes, including Caribbean beaches, volcanoes, and rainforests. More importantly, perhaps, it has drinkable tap water, a good public transportation system, reliable Internet service providers, and low requirements for residency. And maybe most importantly, the health care is both accessible in terms of pricing, as well as good in terms of quality. An American living in Costa Rica will only pay approximately $55 a month for health insurance.

Other countries popular with expats are Mexico, Panama, Ecuador, Thailand, and of course the European favorites of Italy, Spain and Ireland.

So, perhaps, that is the solution: finding your very own tropical paradise to retire to. Whatever your own conclusions may be, one thing is for sure. Planning ahead, figuring out how much money you need to get by, and starting to save up is not negotiable for most Americans nowadays.

Comments

I’ve been trying to get my wife to retire with me down in Central America or Southeast Asia as well!
Cheaper health care, better weather, and overall lower cost of living are the driving forces. Once we don’t need to work here anymore, I don’t see any reason to stay!